Method of securitizing a portfolio of at least 30% distressed commercial loans
First Claim
1. A method for assembling a commercial loan portfolio, comprising the steps of:
- selecting a plurality of commercial loans from among a group of commercial loans to create a loan portfolio in which loans comprising at least thirty percent (30%) of (i) the portfolio market value, (ii) the portfolio outstanding principal balance, or (iii) the portfolio commitment amount, are distressed loans which;
(i) have a payment default, or (ii) where payment default is considered likely;
creating a data base in a computer for each commercial loan in the selected group of loans, said data base comprising tabulated information including;
(i) recovery rate information comprising borrower cash flow, projected net payments, and related collateral; and
at least one of the following;
(ii) borrower cash flow information, (iii) loan information including principal amount, interest rate, unfunded commitment amounts, credit information, and amortization information, (iv) loan pricing parameters, (v) loan cash pay rate information, (vi) loan collateral value, (vii) workout parameters including borrower debt capacity and liquidation information, and (viii) loan discounted cash flow valuation;
determining anticipated cash flows from each commercial loan in the selected plurality of commercial loans; and
establishing a purchase price for each commercial loan in the selected plurality of commercial loans.
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Abstract
A platform and a securitization methodology that provides lenders with an opportunity to maximize the returns on their distressed commercial credit facilities and overcomes the obstacles that have historically precluded the securitization of distressed commercial loans. The present invention is based upon an underlying portfolio of at least 30% distressed commercial loans for securitization that emulates the predictability and regularity of the cash flow and recovery characteristics of a portfolio of generally performing commercial loans, thus eliminating crucial historical barriers to securitization of such distressed commercial loans, such as the absence of predictable and regular cash flows and predictable recoveries. The methodology of the present invention takes a specified mix of distinct classifications of distressed commercial loans with specified characteristics in confluence with structural specifications, such as specific reserves and safeguards, to create a synthetic asset class that emulates the characteristics of a portfolio of performing loans.
32 Citations
24 Claims
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1. A method for assembling a commercial loan portfolio, comprising the steps of:
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selecting a plurality of commercial loans from among a group of commercial loans to create a loan portfolio in which loans comprising at least thirty percent (30%) of (i) the portfolio market value, (ii) the portfolio outstanding principal balance, or (iii) the portfolio commitment amount, are distressed loans which;
(i) have a payment default, or (ii) where payment default is considered likely;creating a data base in a computer for each commercial loan in the selected group of loans, said data base comprising tabulated information including;
(i) recovery rate information comprising borrower cash flow, projected net payments, and related collateral; and
at least one of the following;
(ii) borrower cash flow information, (iii) loan information including principal amount, interest rate, unfunded commitment amounts, credit information, and amortization information, (iv) loan pricing parameters, (v) loan cash pay rate information, (vi) loan collateral value, (vii) workout parameters including borrower debt capacity and liquidation information, and (viii) loan discounted cash flow valuation;determining anticipated cash flows from each commercial loan in the selected plurality of commercial loans; and establishing a purchase price for each commercial loan in the selected plurality of commercial loans. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9)
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10. A method of creating a capital structure to securitize a loan portfolio, comprising the steps of:
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selecting a plurality of commercial loans from among a group of loans to create a loan portfolio in which loans comprising at least thirty percent (30%) of (i) the portfolio market value, (ii) the portfolio outstanding principal balance, or (iii) the portfolio commitment amount, are distressed loans which;
(i) have a payment default, or (ii) where payment default is considered likely;creating a data base in a computer for each loan in the selected group of loans, said data base comprising tabulated information including;
(i) recovery information comprising borrower cash flow, projected net payments, and related collateral;
(ii) loan information including principal amount, interest rate, unfunded commitment amounts, credit information, and amortization information;
(iii) loan pricing parameters;
(iv) loan collateral value;
(v) workout parameters including borrower debt capacity and liquidation information; and
(vi) loan discounted cash flow valuation, said computerized data base being stored in a computer-readable memory; andadding loans to, and/or subtracting loans from the loan portfolio in order to emulate the cash flow and recovery characteristics of a portfolio of performing loans. - View Dependent Claims (11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24)
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Specification